I've thought a bit about how to make Nightmare work. I think he could make a fascinating film, I'm just not sure how to make it work with their plans for Baron Mordo (which seems to be set up for the sequel).
I'd draw a bit from the Doctor Strange animated movie where there were kids trapped in nightmarish dreams a bit from the second (?) appearance of Nightmare where Doctor Strange has to enter his realm but stay on the path or else he'll get trapped, and then make it a movie that is essentially a journey into Doctor Strange's psyche. Have Nightmare tempt and torment Strange about a life he could have had or his past failures. Delve into his past and his relationship with his family (his sister drowning, his parents dying, and how this hardened him and made him a cynical doctor).
I think it's a movie that would have a lot of potential to explore the character of Doctor Strange and it would create a role for Rachel McAdams, but I can't really see a place for Wong or Mordo (while a movie with Mordo could probably use Wong effectively).